Matthew Haywood
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Miners gaming the BCash emergency difficulty adjustment
Block 481124 has special meaning on both the Bitcoin and BCash chains this week. For Bitcoin, it will mark the point at which Segwit finally moves to active, bringing with it a capacity increase and the potential for massive off-chain scaling through solutions like Lightning Network. For BCash, it delivered the first increase in mining difficulty since it split from Bitcoin on August 1st. The week also saw the emergence of a new phenomenon on both networks , a back and forth movement of hash power as miners chased profit. To understand the effect of having two high profile SHA-256 based cryptocurrencies we need to look at how the two chains manage mining difficulty. This, along with the price of the coins and the fees brought in from transaction fees, determines how profitable their mining is.
Segwit2x, ‘The New York Agreement’
On May 23rd the Digital Currency Group released a statement declaring that 58 signatories had agreed on a way to end Bitcoin’s ‘scaling debate’. Known as the New York Agreement (NYA) it was said to be a compromise between the two sides of the debate — those who want to achieve scaling through Segregated Witness (Segwit) and those who prefer to scale by increasing the block size. It consists of two sequential phases — to activate Segwit using BIP 91 (making it compatible with the UASF) and then to hard fork the base block size to 2 MB ninety days later.
Why your Bitcoin will be safe when ‘Bitcoin Cash’ is released
On August 1st at 12:20 UTC a new cryptocurrency called Bitcoin Cash will be launched. It's based upon Bitmain’s UAHF proposal which was initially created as a contingency plan to thwart the efforts of the UASF, which now looks likely to activate without incident. Whilst the arrival of yet another alt-coin derived from Bitcoin’s source code is not newsworthy in itself, the fact that Bitcoin Cash shares a common transaction history (blockchain) with Bitcoin has raised its profile somewhat.
All roads lead to Segwit
There are currently three proposals for activating Segwit on Bitcoin — Segwit2x, BIP 91 "Segsignal," and BIP 148 "UASF." The first two are intended only for use by miners and the third is primarily being run by users. We’ll take a look at each one in turn and show they all use a very similar approach to achieving their shared goal. We’ll also look at the differences between them and see what effects they can have on one another.
